International Finance
January-February 2019MagazineOpinion

Why Banking as a Service is Transformational

Why Banking as a Service is Transformational
Banking-as-a-Service (BaaS) not only provides organisations with the ability to build, configure and manage their own financial services, but also gives them greater autonomy when providing for the needs of their clients.

There’s no doubt that the way we pay for goods and services has been transformed by technology for the better. It’s thanks to innovative technology – and its integration into the systems of companies in the payments and banking sectors – that we are able to take advantage of the ‘one-click’ economy.
A major contributor to the extension of banking services – beyond those of traditional banks – has been Banking-as-a-Service (BaaS). Not only does it provide organisations with the ability to build, configure and manage their own financial services, it also gives them greater autonomy when providing for the needs of their clients.
The use of cloud-based infrastructures and APIs has allowed innovative fintechs to respond to market needs more quickly than traditional banks, who are hindered by legacy systems. This integration of cutting-edge technology results in enhancing a consumer’s digital experience with access to convenient and tailored banking services online.
The ‘cross-border issue’
Although FinTechs are greatly changing the way banking and payments are made, there are still challenges when it comes to offering “cross-border” services.
One difficulty is the inability to provide access to IBAN accounts for customers in order to enable easy cross-border transactions. While the creation of such accounts is strictly coordinated and regulated at a national level in the EU, it is still the case that IBAN issuing, as well as the corresponding banking and clearing are still dominated by traditional banks.
Additionally, financial service providers often face concerns from clients when it comes to multi-currency handling which often includes high transaction fees, and expensive exchange rates. Meeting the requirements for local and international banking and payment regulations is yet another challenge to master.
Despite these cross-border challenges, a growing number of innovative BaaS providers are benefiting from the power of open banking and the ‘plug and play’ principle of API technology. This allows them to offer highly customisable solutions for the changing needs of businesses operating across borders.
BaaS platforms and the opportunity to offer cross-border capabilities
In order to maintain strong growth, BaaS providers need to be able to offer merchants the ability to operate internationally.
Thanks to the power of global eCommerce, retailers have greater access to overseas customers than ever before. According to data from eMarketer1, global retail eCommerce sales grew by four times the rate of overall retail in 2017, reaching $2.29trn.
To support this market, BaaS platforms aim to provide simple and secure payment tools for their customers regardless of where they are in the world. An important step in achieving this goal is for BaaS platforms to use the opportunities of open banking to develop an IBAN offering.
BaaS platforms with IBAN issuing capabilities can offer major benefits to clients. Let’s use the example of a phone service provider. In order to avoid reconciliation issues with invoice payments and numbers, a phone service provider could work with a BaaS platform to give every customer an IBAN that would directly reflect the balance on their account. Offering IBANs, therefore, not only allows BaaS platforms to help a customer make international payments, but offers other benefits, such as eliminating complex reconciliation problems for merchants.
In addition to IBAN accounts, cross-border transactions can be further streamlined by BaaS providers offering multi-currency management tools. With these tools, businesses are better equipped to collect foreign currencies and operate in foreign markets. The combination of IBAN issuing capabilities and simple and cost-efficient multi-currency management will make it easier for international businesses to rationalise and integrate payment flows into one easy-to-manage platform.
What’s more, they will still be able to take full advantage of all the other benefits of BaaS platforms – whether it’s optimising account management, performing settlements, reconciliation and onboarding, or navigating the ever-increasing number of regulations and directives that surround the banking and finance environments.
What does the future look like?
In order to allow businesses to take full advantage of the global opportunities on offer, BaaS providers must listen to their clients’ needs. Only by doing so can they provide a platform that is truly equipped to facilitate growth and efficiency.
Spotting the gap between what traditional banks have to offer and what FinTech companies aren’t currently providing, BaaS providers are beginning to launch cloud-based API-driven products which integrate the issuing of IBAN accounts. This is something that ONPEX has long pioneered, leading us to release our own BaaS platform with integrated IBAN accounts in August 2018.
Like ONPEX, BaaS providers are also realising the advantages of combining IBANs with multi-currency management. Overall, forward-thinking new entrants to the market are starting to make the administration of finances easier for multinational companies trading across borders.
With the total value of global B2B cross-border transactions reaching $136 trillion in 2017, and forecast to hit $218 trillion by 20222, it is time that businesses of all shapes, sizes and sectors, are given the ability to develop the financial services their customers need.
By integrating IBAN issuing and other services to facilitate cross-border transactions, leading BaaS providers are setting a new benchmark for FinTech organisations while enabling businesses to fulfil
their true potential on the global stage.
Giving merchants and customers what they need
With progress being made by BaaS providers such as ONPEX, FinTechs are offering merchants across the world the solutions and tools they need to grow whilst enabling them the ability to meet increasing customer service expectations – particularly when it comes to fast, simple and secure payments.
Any organisation that is looking to grow in a highly globalised environment, should be looking to use the power of solutions like BaaS.

2 Juniper Research (2018): Whitepaper “Why is there big money in B2B transfers?”. [online] Available from: Last accessed: 28.07.2018

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